Hikma to purchase Bedford Laboratories, Ben Venue site

LONDON—Hikma Pharmaceuticals PLC has announced it will purchase Ohio-based Bedford Laboratories, a U.S. generic injectables business, from the Boehringer Ingelheim group of companies. The deal includes a $300 million total consideration, including an upfront payment of $225 million in cash and another $75 million in cash payments due upon the achievement of performance-based milestones over the next five years. The transaction is expected to be completed in the second half of 2014, subject to receiving customary regulatory approval.

 

Hikma is acquiring Bedford’s portfolio, which includes 82 of its own products and two licensed products from third parties. Bedford’s production of its own products had been limited by manufacturing issues, but Hikma plans to begin relaunching about 20 of these product lines between 2015 and 2017, with further relaunches to come later.

 

The Bedford products Hikma is acquiring include a sizeable lyophilised and cytogenic portfolio. About 50 percent of the products are oncology products, which are of particular strategic value to Hikma because it has only a minimal number of oncology products in the United States.

 

Also incorporated into the deal were certain intellectual property rights owned by Bedford as well as its diverse research and development and business development pipeline. Bedford’s pipeline includes 16 products pending U.S. Food and Drug Administration approval and 11 more under development.

 

Other assets included in the deal include substantial raw material inventories—primarily components for products not currently in production by Bedford Laboratories, but which Hikma intends to re-launch into the marketplace—valued around $60 million.

 

Hikma will also absorb Bedford’s sales and marketing team, and is currently evaluating a sales and marketing restructure that will increase coverage across the United States. Hikma intends to optimize the U.S. sales team with its current team and with the Bedford team.

 

“We are acquiring a broad product portfolio, deep R&D pipeline and a number of experienced employees,” says Said Darwazah, CEO of Hikma Pharmaceuticals.

 

The acquisition gives Hikma a strong market position in the United States as the third largest supplier of injectable generics by volume, the company noted in an investor call. Its strategic goal is to increase its market share by value—a category in which it currently ranks ninth in the United States—by developing a strong portfolio and pipeline of more valuable products. The products in Bedford’s pipeline focus on high-value medically necessary and acute care products. The pipeline also includes licensing and co-development partnerships.

 

“We are going to have limited revenues in 2014 and 2015 while we are transferring the (acquired) products to Hikma facilities; revenue growth should start to be delivered in 2016. We don’t expect to have all of the initial 20 acquired products to be back on the market until 2017,” said Khalid Nabilsi, chief financial officer of Hikma, during the investor call.

 

In addition, Hikma has entered into an exclusivity agreement with the Boehringer Ingelheim group to acquire the assets of the Ben Venue manufacturing facility in Bedford, Ohio, which is reportedly one of the largest sterile injectable manufacturing sites in the world and Bedford Laboratories’ primary manufacturing partner until the site’s closure at the end of 2013 due to persistent manufacturing issues and costly remediation required to correct quality concerns that had hindered the site for more than two years.

 

Hikma intends to tech-transfer products to its existing manufacturing sites in the United States, Portugal and Germany, but says it may salvage machinery from Ben Venue or reconsider the site for future purposes.

 

“The increased scale of our business will better leverage our global manufacturing facilities, and the expertise that the Bedford employees will bring across a number of our key business functions will enhance our existing injectables platform,” says Darwazah.

 

“We think we have enough capacity to bring in all of those products we plan to bring in during the first two to three years,” says Riad Mechlaoui, global head of injectables at Hikma. “We had anticipated increasing our research and development and business development activities to bring in a lot of volume into our facilities, and this just happened to be the right thing to do to complement what we had done.”

 

“We believe that this is a positive development, allowing Hikma to leverage its existing infrastructure and manufacturing capabilities to reintroduce important products to the U.S. market, bringing significant benefit to patients,” said Paul R. Fonteyne, president and CEO of Boehringer Ingelheim USA Corp., in a media release. “For more than 20 years, Bedford Laboratories and its product portfolio have been of great value to patients, customers and the marketplace. As part of Hikma, the Bedford team will remain focused on strengthening its relationships with customers and continuing to serve the needs of patients.”